When calculating the line buy quantities the system may round to package quantities. The system always rounds up to the next package quantity. If the package quantity exceeds Economic Order Quantity (EOQ) by twice the value (EOQ x 2) and the divisibility flag is set to Yes the package quantity rounding does not occur.
Note: Line items on purchase orders will not be repriced unless the quantity break level has been reached.
Package quantities and their divisibility may be set on a branch level, if the branch is a child branch in a central warehouse procurement path. A child branch package quantity may affect how much the child branch gets on a transfer from the central warehouse and, therefore, how many rounding increments the mother central warehouse performs. This ensures that the central warehouse buys enough to meet child branch package quantity rounding during branch transfers. Of course, this all depends on the vendor shipping complete without backordering.
Note: The surplus calculation is revised to set surplus quantity to the available quantity for an item, if the item's surplus point is zero and there is a non-divisible buy package quantity for the item.
The following examples help demonstrate how package quantities are considered.
"A" package quantity is equal to one as shown on the following Primary Inventory Maintenance screen:
The Suggested PO Queue recommends a line buy quantity of 439 as show in the following report:
"B" package quantities are equal to 100 with the divisibility flag set to Yes as shown on the following Primary Inventory Maintenance screen:
Since the package quantity exceeds EOQ x 2 in all branches, the system does not use the package quantity in the line buy calculation.
"C" package quantities are equal to 100 in all branches with the divisibility flag set to No in the parent branch and Yes in the child branches.
Since the package quantity exceeds EOQ x 2 in all child branches, the system does not use the package quantity in the line buy calculation. However, since the parent branch is not divisible, the system rounds once from 439 to 500 for the line buy quantity.
"D" package quantities are equal to 100 in all branches with the divisibility flag set to No in the parent branch and No in the child branches. All branches require 100 items.
Since seven branches are in need of inventory, 700 items are purchased. This may cause other products that might have been included on the Suggested PO Queue to be dropped from the suggestion because the system tries to meet the vendor target of 500. One product needs a quantity of 700 to be purchased. Other products that are below line point, but not below order point, are eliminated from the purchase.
See Also:
Suggested Purchase Orders Queue Principles and Guidelines